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why not closed end funds?
Old 04-07-2006, 03:08 PM   #1
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why not closed end funds?

How about our retirement portfolio made up of closed end funds? From what
I've read, less volatile since the manager doesn't have to sell stocks in a bear
market...It seems a good Idea for the fixed income portion at least...I've read
where the fee's are lower but I haven't found this, for the most part, to be true.

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Re: why not closed end funds?
Old 04-07-2006, 03:24 PM   #2
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Re: why not closed end funds?

One of the main problems with a closed in fund is the margin...

Very rarely do they trade for what the underlying securites sell.... and if you get in one it will of course sell for a discount!!! So, you never get your full money back that you would with an open ended fund...

If you want low trading, do the index or tax managed funds... they try to keep trading low

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Re: why not closed end funds?
Old 04-07-2006, 04:00 PM   #3
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Re: why not closed end funds?

Why not!

Kind of yet another way to skin a cat - both specialized and a reasonably large universe to play in. Against my oft stated recommendation toward books and overthinking - a trip to the library and some Goggle research is probably in order.

Back in ancient times(1970's, 1980's) in 'mult-asset land'(pre slice and dice) I putzed a little - the last being a Putnam foreign fixed income yielding 14%(good old days).

Still have a dog(NOT RECOMMENDED) - gcv - purchased in dribs and drabs since the early 90's. With reinvested div.'s it's only giving about 18% yield on original investments - pretty pathetic as that works out to about 8% over the time frame - even though I tryed to purchase at points at discount to NAV.

Discount to NAV is kinda the mantra in this universe - and a variety of asset classes are availible. You want an asset class that's really sucking wind (high discount to NAV) - that you 'know' will have it's day in the sun.

Great place for male hormones and a little mad money - especially in bad weather and if you don't have any other fun hobbies. It's on my - one of these days list - after kayaks.

heh heh heh heh
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Re: why not closed end funds?
Old 04-07-2006, 06:34 PM   #4
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Posts: 213
Re: why not closed end funds?

I do own CEFs but am not an expert by any measure.

One reason to hold them is the yield
Cohen & Steers Total Return Realty CEF (RFI) yields 7.0%
Vanguard REIT VIPERs ETF (VNQ) yields 2.43%

Like Unclemick said always buy at a discount and check the historical discount. Some people have said discounts appear to narrowing across the board. Besides discount be careful how much leverage the funds use.

A couple of good information sites are
CEF connect
Morningstar' CEF discussion board

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Re: why not closed end funds?
Old 04-08-2006, 11:36 AM   #5
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Re: why not closed end funds?

I hold GIM, which is a CEF, but it is the only one I actually hold long term. CEFs have the nasty habit of having outsized expense ratios, since once the manager has the money, it cannot run. Many/most of the fixed income ones have lots of leverage, which usually juices both yield and risk.

You never want to buy CEFs when they are first offered, since they will inevitably go to a discount to NAV. But you can make some money with these things, provided you buy when the discount gaps out. I play with HPF and PDT, buying them whenthe dicount balloons, and selling when it narrows. This happens pretty reliably every year or so. PDT is especially attractive because an insurance company owns over 40% of it and would likely buy up all the shares and force the fund to dissolve (at NAV), if the discount got big and stayed big.

But I wouldn'tr make most of these things the foundation of my portfolio.
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

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